There’s an old saying in management: If you can’t measure it, you can’t manage it.
Good instincts are important in business, but the best companies base their decisions on evidence – hard data – and KPIs are vital.
A KPI is a key performance indicator. It’s a measurement of something important that shows how well your business is performing. Since the purpose of your organisation is to solve problems and deliver value, the most important thing for a business to measure is how well you are solving problems for your customers or stakeholders and delivering value to them. A well-chosen set of KPIs will show how your organisation is performing across a wide variety of areas and even better, show you where you can make the biggest improvements.
Even though KPIs always measure something that happened in the past, they offer great predictive power. They will let you know if something is going wrong in your business, before it becomes a major problem, and they can be useful when you need to assess if staff or suppliers are doing a good job.
What makes a good KPI?
KPIs should align to your organisation’s core value propositions, i.e. it should tell you how well you are delivering on your promises to your customers. For example, if your value proposition is to deliver the fastest pizza in town, the first thing you measure should be the speed of each delivery.
Next, they need to have SMART goals. You know: Specific, Measurable, Achievable, Relevant, and Timely. You might set an average pizza delivery time of 15 minutes. It’s very specific, you can measure it pretty easily, it should be achievable if you have decent processes and staff, it’s very relevant (all your ads talk about how fast you are), and you can time-box it (last month, our average time was 14.6 minutes. This month it’s 15.4 minutes).
Some more tips for creating good KPIs:
- A KPI should be simple. Anyone in the organisation should be able to understand it.
- It should be easy to compare between people or time periods
- It needs to be one that is within your control. There’s no point beating yourself up if your KPIs are down to something beyond your control (like falling airline ticket sales due to a global pandemic, for example).
- It should be easy to see who is accountable for the KPI (ownership). Not just so you can blame someone if you miss, but so that everyone knows what success looks like and feels good when they achieve it.
- Measurement should be as automated as possible and it should be easy to record, retrieve and display the trends. You don’t want to spend most of your time doing reports – that’s admin and that takes time away from solving problems for your customers!
If you need some ideas for KPIs that you can start measuring in your business, here are a few examples:
- Sales appointments made
- Deals closed
- New user signups per month
- E-commerce: abandoned cart %
- Google Ads: cost per conversion
- Newsletter signups
- Bounce rate
- PDF downloads
- Active users in the last 30 days
- Churn rate
- % Support tickets resolved
- NPS – Net Promoter Score. This is the classic “How likely are you to recommend our service to a friend or colleague?” Score from 0 to 10.
- Billable hours per employee per month
- Support tickets answered
- Calls per hour
Fortunately, it has never been easier to start setting, measuring and reporting on KPIs.
Most decent SaaS platforms have KPI measurement and reporting already built in, eg. CRMs like Salesforce, helpdesks like Zendesk. The reason for this is that these companies are always desperate to demonstrate the ROI (return on investment) for their customers and KPIs are a classic way to do that (e.g. “wow since you’ve been using Hubspot your customer satisfaction score has improved from 4.6. to 8.9!”).
Online advertising platforms like Facebook and Google Ads contain a great deal of performance tracking and this is one of the most important reasons that they have managed to attract so much advertising revenue – until these platforms came along it was notoriously difficult to collect useful performance data on advertising activity.
If you want to implement a Net Promoter Score system very quickly and easily, the popular survey software SurveyMonkey has prebuilt templates for NPS. It takes minutes to set up and start gathering data.
For reporting and display there are specialist tools like Klipfolio, Tableau and even free software like Google Analytics has more KPI capabilities than enterprise software of 20 years ago.
Like any business tool, KPIs can have their pitfalls. If one is not careful in establishing a good culture in the business, KPIs can become too inflexible and lead to a ‘blame game’. It’s important remember that a KPI always measures something that happened in the past and ‘you don’t drive a car a car by looking in the rear-view mirror’. Someone not hitting their KPI target doesn’t mean you should fire them. Maybe it shows they need training, or the market has changed. Or maybe you’ve got it wrong and you’re measuring the wrong things.
A quarterly review of KPIs is often helpful. Ask yourself: are we actually achieving this KPI? is it still the right thing to be measuring? is it worth measuring, i.e. are we gathering any useful information from it? If not, dump it and think creatively about what else you could be measuring instead – based as always on trying to do a better job for customers or stakeholders.
Sometimes it’s just not practical to measure the precise KPI that you want and I’ve seen businesses go down huge rabbit holes trying to measure everything perfectly. For example, it can be fiendishly hard to work out how many phone calls you get from different versions of the ads you’re running. At Mogul, we use proxies instead e.g. instead of measuring phone calls, we’ll measure other things that are related to sales instead. e.g. contact form submissions or quote requests. These don’t tell us exactly what we want but are the best we can do. Most important, they give us plenty of information in order to work out what ads are producing the best results.
So hopefully I have convinced you of the pressing need for every business to start measuring KPIs and using them to make decisions. Here are my top tips:
Less is more: ask yourself…
- What is the minimum number of things we need to keep track of to see if we are getting better or worse at doing our job? As a company and as individuals.
- What is the minimum amount of money we need to spend to make the measurement and reporting of these KPIs accurate and easy?
- What is the ideal frequency for checking these numbers? Daily, weekly, monthly? Remember that every time you’re checking the numbers, you’re avoiding doing something else more productive – like talking to your customers. To extend the car metaphor… You don’t make the car go faster by looking at the speedometer. That’s what the accelerator pedal is for.
A final thought…
- Build KPI reporting into your regular management meetings. Circulate them beforehand and only dive into them if they are telling you something important, i.e. something you and your team need to make a decision about. Otherwise get out there, do great work and the KPIs will look after themselves!